Summary: US consumer confidence back to 2018 and 2019 levels; sizable increase in Conference Board index in June; reading more than expected; views of present conditions, short-term outlook improves; June quarter “strengthens”; business conditions, financial prospects to “continue improving”; job indicators at 21-year high, indicative of “very tight labour market”.
After the GFC in 2008/09, US consumer confidence clawed its way back to neutral over a number of years and then went from strength to strength until late 2018. Measures of consumer confidence then oscillated within a fairly narrow band at historically high levels until they plunged in early 2020. Subsequent readings then fluctuated around the long-term average until March this year.
The latest Conference Board survey held during the first three weeks of June indicated US consumer confidence returned to a level last seen in 2018 and 2019. June’s Consumer Confidence Index registered 127.3, well above the median consensus figure of 119.0 and markedly higher than May’s final figure of 120.0.
Consumers’ views of present conditions and their outlook of the near-future both improved. The Present Situation Index rose from 148.7 to 157.7 and the Expectations Index increased from 100.9 to 107.0.
Lynn Franco, a senior director at The Conference Board, said the increase in the Present Situation Index suggested “economic growth has strengthened further” in the June quarter while the improved outlook was a sign “business conditions and their own financial prospects will continue improving in the months ahead.”
US Treasury bond yields eased slightly on the day. By the close of business, the 2-year Treasury bond yield had slipped 1bp to 0.25%, the 10-year remained unchanged at 1.48% while the 30-year yield finished 1bp lower at 2.09%.
In terms of US Fed policy, expectations of any change in the federal funds rate over the next 12 months remained low, although there has been a slight upwards movement over the past month or so. Federal funds futures contracts for June 2022 implied an effective federal funds rate of 0.15%, about 5bps above the current spot rate.